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Supply Chain Evolution: Serving More Than Manufacturing

Transparency, a buzz word that harkens back to 2001, emerged as larger companies bought up smaller ones and spent hundreds of thousands of dollars integrating disparate IT systems to make a go at bringing efficiencies to the manufacturing supply chain. At the time, companies grappled with trying to determine and deploy the technology that would build stronger ties between companies that made raw parts and those that manufactured finished goods.

The supply chain once served manufacturing, but now it serves business, {complink 7426|Gartner Inc.} research analyst Kevin O'Marah wrote in a research report. A recent Gartner survey on supply chain organization structures and budgets shows a leap in understanding the benefits from a formal organizational structure. Only 75 percent of companies established a formal supply chain organization in 2005, but by 2010 that number rose to 86 percent.

The survey also asked for the highest-ranking supply chain executive title. Answers varied widely. Only 29 percent used the label “supply chain” to describe this leader, and 9 percent called it “procurement.” Another 9 percent chose the label “operations,” while 7 percent said “logistics.” Oddly enough, 43 percent couldn’t find the functional title for their highest-ranking supply chain executive among those terms, according to the study.

Roles are expanding. Fifty-five percent say they're responsible for customer fulfillment, 59 percent for strategy and change management, and 61 percent for technology that enables the supply chain. The No. 1 overall goal remains cost, followed by improvement in customer satisfaction, getting new products to market faster, and risk management.

Supply chain employees don’t typically hold executive vice president and C-level titles, according to the study.

Despite the large share that report directly to the CEO, most still hold a Vice President title rather than Executive VP. Still, more than half of respondents in the survey control budgets for transportation equipment and machinery, packaging materials and raw materials, maintenance repair parts and services, third-party logistics services, and packaging services. In fact, supply chain organizations controlling manufacturing spend 47 percent of company revenues on average each year on such things.

Do you think outside the box? It may sound cliché, but it works. Companies prosper and succeed when focusing on acquiring, mentoring, growing, and retaining innovation and supply chain talent. Take a tip from marketing channels and measure your company's supply chain as customers experience it. Tap the correct metrics to manage performance and create a culture that embraces measurement for improvements. How are you improving your company's supply chain?

And what do you call it?

6 comments on “Supply Chain Evolution: Serving More Than Manufacturing

  1. Laurie Sullivan
    October 13, 2010

    Hello Gerry Fay, Roy Vallee, Gert Labuschagne, Al Maag, Jim Smith, Harley Feldberg, John Hourigan, and Peter Kong.

    Hey, talk to me. It's been a long time, but we're all friends here. Well, some of you I don't know, but most in the list above I do. What's up? What do you call your supply organization? How are you improving your company's supply chain?

    You know, there's a lot of things you can teach other industries such as online advertising. They're just starting to automate ad media buys, using automation tool. I often talk about how much cost the electronics industry, specifically electronic component distributors, removed from the supply chain.

    So, talk to me guys. How are you improving your company's supply chain these days?

    Best.

    Laurie

  2. bolaji ojo
    October 13, 2010

    Transparency in the electronics supply chain? That would be the day. Managers can talk as much as they want about how they want a transparent supply chain but it's a slippery goal sought half-heartedly by people in the industry. Transparency would expose a company's inner workings to those they may not be comfortable allowing access to corporate secret. A transparent supply chain would require a company to be completely open with its suppliers and contractors, who in turn may need to share such information with their own suppliers and end customers. It's a recipe for disaster. Companies try as hard as they can to control their supply chain, including sometimes not even disclosing who supplies what components to them–just ask Apple Inc.

    At the same time, many corporate executives still see supply chain managers as procurement specialists and do not understand how complicated the system has become and how difficult it is to manage a complex system across multiple time zones and countries. A supply chain can help a company make money or help it lose a ton of money. That's why the best companies wield their supply chain as a competitive weapon. Again, just ask Apple. Businesses don't compete, their supply chains do, someone once said. This is very true and the last thing anyone would like to do is make their greatest offensive and defensive weapons transparent to the opposing team.

  3. Laurie Sullivan
    October 13, 2010

    You're correct Bolaji. I've heard the word “transparency” used too many times among online advertisers in the past two years. That's the buzz word for Google, Bing and Facebook these days – transparency – because people using search engines and social networks need to know how to protect their privacy. They only way they can do that is if the engines and networks create a transparent structure.

    Google, actually, offers a dashboard that lets you see the information they have collected on you. It helps them serve you more relevent ads. You can clear the cache at any time, but you need to know where to find it. If anyone wants to know where to find it, they will have to ping me back on this blog and ask.

    Yes, company practices need to become more transparent. Transparency for the way they target ads to consumers through cookies in browser windows and ad tags on website pages. Yes, technology has become complicated, so electronics components distributors and manufacturing companies need to work on increasing transparency, too.

    Laurie

  4. Barbara Jorgensen
    October 14, 2010

    This is a great blog and great information Laurie. I have to wonder why it took so many companies so long to come to the same conclusion Dell made more than a decade ago–that a competitive supply chain was a business asset. Dell's supply chain and build-to-order practices gave it a huge advantage in the PC market for a long time.

    I have to look back and see if Dell ever elevated its supply chain managers to a C-level title. It was certainly a C-level function…

     

  5. Jennifer Baljko
    October 15, 2010

    Hi Laurie,

    Good post. The mind boogles. How can companies want their supply chains to be competitive weaponary and not give it c-level priority? Given how much money passes in and out of  supply chain organizations, you would think top management would want a high-ranking executive dedicated to overseeing supply chain strategy and better aligning it to the company's business goals.

    Unfortunately, for many organizations, supply chain is still a glorified word for component buying and part-pushing. Until that core logic shifts, the imbalance will remain.

    I was glad to see this, though: “Only 75 percent of companies established a formal supply chain organization in 2005, but by 2010 that number rose to 86 percent.” Maybe once supply chain organizations are more thoroughly defined, their operations and practices will eventually get on corporate radar screen in a bigger way.

    Jenn

  6. Laurie Sullivan
    October 19, 2010

    Jenn, 

    Great to hear from you. How's Barcelona? I agree with you when you write that for many organizations “supply chain” remains a glorified word for components buyer and parts pusher.

    It's interesting that the online advertising industry is now trying to sort through some of the same issues I thought electronics manufacturers solved years ago. It seems as if electronics manufacturers are in the same boat as they were in 2001, rowing fast to move ahead, but going nowhere. 

    Why is that? These guys are intelligent. One would think it shows they don't care. 

    Anyone else out there care to share your thoughts?

    Laurie

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